FY 1998 Assistance to the NIS Request: $15,400,000 (Tajikistan Request to USAID)

Posted: October 18, 2011 in Economy and Resources, Geography, History, International, Journalism, Politics, Region, Tajikistan
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TAJIKISTAN

FY 1998 Assistance to the NIS Request . . . . . . . . . . . . . . . . . $15,400,000

Introduction

Tajikistan is the poorest of the five Central Asian Republics and the only one of the five in which underlying ethnic, regional, economic and ideological strains have led to open warfare and major population displacements. A cease-fire has continued to be in partial effect since late 1993, while UN-moderated peace talks appear to be making incremental progress in establishing a political consensus. The UN Mission of Observers in Tajikistan (UNMOT) monitors the cease-fire agreement, while Commonwealth of Independent States (CIS) Russian-led troops, at the request of the local government, guard the southern Tajikistan boundary and monitor the ceasefire. Donor efforts are making a difference in Tajikistan’s situation. For example, the economy, in free fall since independence, achieved a measure of economic stability last year. U.S. interests are based on providing humanitarian aid, helping to establish a framework for sustainable economic growth, promoting regional stability in Central Asia and promoting an independent, democratic and market-oriented Tajikistan that is friendly to the U.S. and constructively engaged in international political and economic relationships.

 

The Development Challenge

An average per capita GDP of approximately $400 places Tajikistan among the world’s least developed countries. Even during the Soviet era, Tajikistan was the poorest of the Soviet republics with a per capita GDP of $1,100. Its economy was based almost entirely on aluminum exports and a cotton monoculture. Social services were maintained with subsidies from Moscow. The collapse of the Soviet Union, followed by the outbreak of civil war in May 1992, thus hit Tajikistan especially hard.

The civil war left at least 50,000 dead, displaced 700,000 within the country and resulted in an outflow of at least 75,000 refugees to Afghanistan. Many returning refugees were faced with rebuilding their homes, and the harsh economic consequences of civil war continue to extract a heavy toll. Thousands of homes and hundreds of schools and medical units were destroyed. The war also left 55,000 orphans, 25,000 widows and a legacy of hatred and suspicion that makes reconstruction difficult.

Political consensus and national reconciliation have yet to be achieved, despite cease fire agreements and continuing rounds of UN-mediated peace talks involving government and opposition groups. In January 1996, two groups of government supporters outside the capital rebelled in an effort to force personnel changes. The government quickly agreed to some changes in return for disarming the rebels. Nonetheless, the political situation remains fragile. Rule of law plays a role in regulating property and commercial rights, but considerable work still needs to be done to put into place the kind of legal and commercial environment needed to support entrepreneurs, minimize corruption, ensure transparency, and build and sustain a market economy.

The breakdown in economic links with other former Soviet republics hampers the flow of badly needed raw materials, consumer goods and food items. Gas supplies from Uzbekistan have been affected because of Tajikistan’s inability to earn foreign exchange to pay its debts. The World Bank, which classifies Tajikistan as a less-indebted low-income country, has joined the IMF to provide assistance for economic reform. Youth unemployment is a major problem. Workers who do have jobs often go for months without being paid.

Productivity in the two major economic sectors, agriculture and industry, has dropped precipitously, and per capita industrial and agricultural production has been reduced at least by half. Prices forfood, non-food items and services increased sharply through 1995, with inflation reaching 2,000% that year. More recently, inflation rates have been lowered and in 1996 were estimated at around 50%, representing a remarkable turn-around. In May 1995, the government introduced a new currency to replace the Russian ruble, the last of the Central Asian republics to do so. The subsequent liberalization of prices and trade, implemented at the urging of the IMF and World Bank, have promoted stability and provided a favorable environment for developing a market economy.

The crisis has been especially severe in the social sectors. For example, the immunization program introduced and maintained during Soviet times has largely collapsed. The departure of many thousands of Russian-speaking professionals following independence left a gap in the health sector and other sectors that has yet to be filled. Infant mortality rates are high (47 per thousand live births). School enrollments have declined. Most families do not have dependable access to either heating or potable water. There is a widespread shortage of pharmaceutical and other medical supplies and many hospitals and clinics are either closed or barely functioning due to a lack of medical supplies, equipment and salaries. Malaria, eradicated during the Soviet era, has reappeared in southern Tajikistan. In the face of these significant social constraints, the government has attempted to start a social program aimed at alleviating poverty and providing basic social protection.

The government has attempted to deal with the crisis, most notably with the release of its “Five Year Economic Plan” in August 1995 that commits the country to “radical changes in economic policy” and states that the goal is to create a “socially oriented market economy.” Tajikistan has reduced consumer and produce subsidies (from about ten percent of GDP in 1995 to one percent of GDP in 1996), liberalized the foreign exchange regime, and eliminated export duties and licensing requirements. Although privatization efforts remain erratic in both industry and agriculture, the elimination of price controls and the state order system represent important steps forward. Official figures indicate low levels of state-controlled imports, but private traders are increasingly active in filling the gaps left by a diminishing government presence. Indeed, a relatively weak central government sometimes provides opportunities for innovation and new approaches at a local level.

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